This blog draws two lessons from the failed Greek programme. Olivier Blanchard is right that the fiscal adjustment of the last 5 years was unavoidable. An earlier debt restructuring could hardly have prevented it. (1) However, an earlier debt restructuring would have allowed significantly lower primary surpluses from now on and it would have made the programme more credible. (2) Equally important, the IMF failed to prioritise a strategy for Greece to regain competitiveness.Read more

On Sunday, with a sizeable majority, the Greek people voted down the proposals of the country’s official lenders. What’s next? We see three main options and will describe the pros and cons of each in more detail. Read more

The decision by the prime minister to call a referendum leaves the Greek citizens with a stark choice. The core of the question is whether Greek citizens will be ready or not to accept that in a monetary union financial assistance and solidarity are only extended if – in turn –the recipient accepts jointly agreed conditions. Read more

While the exact decision of the Greek government is not yet to my knowledge clearly communicated, it appears that besides a bank holiday, the government intends to impose capital controls. The Guardian reports that for capital control measures to take effect, the Greek cabinet must approve the recommendations of the Greek financial stability council and a presidential decree is needed. Read more

European Commission President Juncker has published the long-awaited report prepared in collaboration with the presidents of the European Council, the Eurogroup, the European Central Bank and the European Parliament. The aim of the report is to prepare a roadmap for the completion of EMU, which is “not an end in itself” but a “means to create a better life for all citizens”. The aim of this blog is to discuss a few of its key elements. Read more

This blog argues that a deal for Greece requires three elements: lower primary surpluses than the creditors are currently asking for; little action on debt except for agreeing to delay IMF repayment (similarly to how European Financial Stability Facility repayments have been delayed); and serious institutional reforms and trust building measures by the Greek government to re-establish confidence, Greece’s most scarce resource. Read more

In order to calm fears about weak euro area governance: better fiscal governance and a mechanism to ensure competitiveness despite the absence of the exchange rate instrument. The euro area requires a fiscal governance system that ensures two objectives: the fiscal sustainability of its members, and co-ordinates an appropriate area-wide fiscal stance that supports the ECB’s monetary policy geared towards price stability. Read more

The ECB has lowered its official interest rate several times in the last years and the rate is now at zero. In March of this year, it has in addition started a large sovereign bond purchase programme. Contrary to popular belief, however, the ECB is not the main driver of the decline in interest rates. Read more